Completely lose…need help!
Need for External Financing To increase production
capacity by 25%, a $500,000 investment is required. The firm wants to maintain a 20% debt-to-asset ratio, and continue to pay 40% of income as dividends. Net Income was $2 million.
A. How much External Financing is needed?
B. How much new Debt must they Issue?
New debt required = (New investment)(Debt ratio)